What connects dinosaurs, dark matter and supply chain finance?

Author : Sumit Roy I TradeAssets I International Chamber of Commerce

At the MENA Supply Chain Finance conference held in the Dubai Chambers last November, Sumit K Roy, Co-founder of TradeAssets, made this seemingly tenuous connection during a panel discussion. So, let’s start with the dinosaurs. 66 million years ago, a catastrophic asteroid strike is believed to have made the dinosaurs extinct. As described in eminent Astrophysicist Dr Lisa Randall’s book on the subject, this event is an example of the impact of dark matter, the invisible entity that comprises 85% of all matter in the Universe, and whose effect on gravitational forces holds galaxies together. So, how do you measure something that cannot be seen or felt? Only through analysis of its impact on visible phenomena using complex data algorithms and computer models, which is what theoretical physicists are leveraging to try to understand and detect dark matter. Therefore, the protagonist of our discussion is not the dinosaur or dark matter, it is data!

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The panel discussion was about SCF and factoring as asset classes. It was reiterated that technical solutions that enhance transparency and security in investing in supply chain finance assets often revolve around digitization and the use of advanced data analytics, blockchain, and smart contracts. Making these asset classes more visible to investors through transparency can involve standardizing reporting and disclosure practices across the industry to provide clear, comparable and comprehensive data about performance, risks, and returns.

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Digitization platforms can centralize transaction data, providing real-time visibility into the financial flows and the status of each invoice or payment, thereby allowing investors to monitor their positions closely. Advanced data analytics can help assess risk in real-time, predict potential defaults, and analyze the financial health of supply chain participants. This is where financial technology solutions can play a significant role by facilitating real-time tracking and reporting of supply chain transactions.

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Partnerships between financial institutions and fintech companies could help in developing platforms that aggregate supply chain finance and factoring opportunities, which could be supported by AI and machine learning algorithms to help predict trends and risks.

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With global trade in the range of US$ 25 trillion annually and open account estimated to be 85% of this volume, the latter is analogous to dark matter for the financial industy. The difference is that abundant information exists and using this data intelligently in solutions will interest investors with data-driven decision-making and position supply chain finance and factoring as attractive investment opportunities and protect this business segment from obsolescence or, like the dinosaurs, extinction.